55 PLUS

Prices expected to rise on active adult projects

January 08, 2006|By Jane Adler, Special to the Tribune

Local builders and experts say new home sales in active adult projects should remain fairly steady in 2006, experiencing perhaps only a modest drop. Higher interest rates are less of a factor in the active adult segment because many buyers pay cash. But buyers can expect price hikes of at least 5 percent as builders pass along rising costs for materials and labor.

"The active adult market is stronger than the general market," says Tracy Cross, president at real estate consulting firm Tracy Cross & Associates Inc. in Schaumburg. "It's holding its own."

New home sales jumped 45 percent in Chicago-area active adult projects last year, according to Cross. In 2005, active adult home sales totaled 2,100, compared to 1,447 the previous year. Sales are under way at 30 active adult developments in the Chicago suburbs, he said. Active adult projects are defined as those whose buyers must be 55 or older.

Cross attributes the sales hike to a swelling pool of older buyers along with a bigger selection of developments. "Every year, you get tremendous growth in the number of people who fall into that age category," said Cross. "Part of the increase in sales comes from the increase in the number of developments." He notes that the first wave of Baby Boomers turn 60 this year, about the age when people start to consider a move to an active adult housing.

Sales at the Carillon projects by Cambridge Homes were up about 10 percent in 2005, according to Dave Smith, vice president of marketing and product development at the Libertyville-based company. Home sales are under way at Carillon Lakes in southwest suburban Crest Hill; Carillon at Stonegate in Aurora; and Carillon at Heatherstone in north suburban Beach Park.

The company expects to sell about 100 fewer homes in 2006, Smith said. "It's not demand, it's supply," he said. He explained that there are about 100 homes left at Carillon Lakes, and no replacement project is planned nearby.

Cambridge does plan to build a Naperville development, Carillon Club, in the third quarter of 2006. The first homes would be ready in the spring of 2007. Carillon Club will be located at 95th Street, west of Illinois Highway 59, adjacent to the White Eagle Country Club. Approved last month by the Naperville City Council, the project will have about 900 homes. Single-family homes, town homes and condominiums are planned. Though exact prices have not been set, Smith expects prices to range from the $200,000s to upper $400,000s.

At active adult developer Del Webb, 2005 sales were "excellent," according to Chris Naatz, vice president of sales and marketing at Del Webb Illinois, a division of Michigan-based Pulte Homes Inc. The company would not provide the number of homes it sold locally.

But Naatz expects higher home sales in 2006 in part because the company will add two developments. In late summer, Del Webb plans to open its new West Haven project in Yorkville at Illinois Highway 47 and Galena Road. It will have about 1,000 homes. This summer, sales will start at Grand Dominion, a Mundelein project between East Hawley Street and Illinois Highway 176, west of Illinois Highways 60 and 83. The project will have 750 homes. Prices aren't available yet.

On a national level, Del Webb expects to sell more houses in 2006. "We have more communities out there and we will sell more houses," said Dave Schreiner, national vice president of active development at Pulte Homes. The company has 41 projects with sales under way. In 2005, the company sold somewhere between 15,000 and 20,000 homes in active adult projects, Schreiner said.

Like other builders, Schreiner doesn't think rising interest rates will slow the active adult segment as much as the overall housing market. "The active adult customer is much less sensitive to interest rates. They have assets and they pay cash" for a house, he said.

But he admits the pace of sales may slow because most active adult buyers have a home to sell, and the most likely buyers are young families who do need a mortgage, he says.

Housing analyst Cross also predicts more reluctance from prospective buyers with a house to sell. They may decide to hold out for their price, he says. In the active adult segment, Cross expects about a 6 percent drop in sales this year. But that compares well to the overall market, where he expects a decline of about 12 percent.

Despite competition from several big new projects, buyers should expect price hikes this year. Cross thinks active adult home prices will increase a little less than 8 percent in 2006. Some builders say the rise will be in the 5 percent range.

Material and labor costs, usually passed on to the home buyer, have risen about 5 to 7 percent annually for the past three years, according to Peter Bianchini, president at Premier Property Groups Inc. The Long Grove-based builder is selling homes at its active adult Terra Villa project in Crystal Lake. Escalating land prices also contribute to higher home prices. Land in McHenry County three years ago cost about $20,000 to $40,000 an acre, Bianchini said. Today that land, depending on zoning and proximity to utilities, costs anywhere from $40,000 to $120,00 an acre.